Agreement, Consideration, Capacity & Intention

Question 1

Offer

Answer 1

Expression of willingness to negotiate a contract on certain terms, made with the intention, that it shall become binding as soon as it is accepted.

Question 2

What form can offer take?

Answer 2

Different forms

e.g. letter, newspaper advertisement, email, text message, conduct.

Question 3

What is the objective approach of the court to an agreement?

Answer 3

What a reasonable person would say was the intent of the parties having regard to all the circumstances.

Question 4

With contracts, do you look into actual intent of a man’s mind? Will saying “I did not intend to contract” negate the contract?

Answer 4

No - you look at what he said and did

Question 5

If someone says they “may be prepared to sell”/”thinking of selling”, will this be sufficiently clear and certain to be an offer?

Answer 5

No - will merely be first step in negotiations - “will sell” would be intention to be bound

This is certainty of offer

Gibson - City wrote to tenant saying council ‘may be prepared to sell house at purchase price of £x’ - was not a binding conttact once the tenant completed the form

Question 6

What is the difference between unilateral and bilateral contracts?

Answer 6

Bilateral: Each party assumes obligation to other party by making a promise to do something

‘Unilateral’ (see note): One party makes an offer calling for an act to be performed by one or more parties. Actual performance will constitute acceptance e.g. “if you deliver a watch to me in the next ten days I will immediately pay you £100”

NB unilateral contracts don’t actually exist - is just a contract formed

Question 8

What is the difference between an offer and an invitation to treat?

Answer 8

Offer: An undertaking to be contractually bound by terms in the event of unconditional acceptance.
Invitation to treat: A first step in negotiations which may or may not lead to an offer. Does NOT use committed language.

Types: advertisements, display of goods (in shop window), invitations to

Question 9

What is the general rule regarding what advertisements are?

Answer 9

They are statements inviting further negotiations/invitations to treat

Question 10

When is an advertisement is not an invitation to treat?

What is the exception for advertisements?

Answer 10

Where an advertisement amounts to a unilateral offer

Advert for a reward (definite promise to pay if a specified condition)

Carbolic Smoke Ball - issued advertisement offering to pay £100 to any person who used a smoke ball for a specified period but still contracted influenza; they deposited £1000 in bank account to show sincerity - Ds bound to pay money to someone who contracted influenza as this was a unilateral offer: clear prescribed act, performance of which constituted acceptance + deposit of £1,000 + certainty of language.

Question 11

What are the 2 requirements of a unilateral offer as per Carbolic?

Answer 11

1. Prescribed act; and
2. Clear intention to be bound

Question 12

When are unilateral contracts formed?

Answer 12

“If you do X, I promise to do Y.”

Only one party making a promise, no one is bound to do a specified act.

Question 13

Usually advertismenets are invitations of treat, but if there are special circumstances that show intention of be bound

Eg in Carill money dposited with a bank in case anyone met conditions

Answer 13

Then advertismeent may amount to a unilateral offer

Question 14

Are price-marked goods displayed in a shop window an offer? Is this different when there is a ‘special offer’ or in a self-service store?

Answer 14

No - will always be an invitation to treat

Would be problematic re minors + alcohol if it was an offer

Question 15

What is the general rule on invitations to tender? Must the requestor accept the most competitive?

Where a party wishes to purchase major item/service - requestor invites

Answer 15

Will be invitations to treat - requestor can accept or reject any tender even if most competitive

Question 16

What is the general rule on auction sales?

Answer 16

Will be an invitation to treat - acceptance of bidder’s offer is indicated by fall of auctioneer’s hammer

Question 17

What are the exceptions for an invitation to tender and auctions?

Answer 17

Where the invitation to tender expressly undertakes to accept the highest/lowest bid (is a unilateral contract)

In an auction without reserve where seller promises to sell to the highest bidder (cf auctions with reserve; if no bid made above price seller keeps goods)

Question 18

Where there is an auction without reserve, how can the auctioneer be sued for breach of contract if they refuse to sell to the highest bona fide bidder? Is the bidder entitled to the goods?

Answer 18

Because there are two contracts…
1. Bilateral contract where bidder makes offer
2. Unilateral contract based on promise that auction will be without reserve

The highest bidder is not entitled to the goods as this is dictated by bilateral contract, but entitled to compensation by damages

Question 19

What are the 4 rules in relation to acceptance?

Can anyone accept? What is the rule? How does one accept?

Answer 19

Must be in response to an offer (i.e. only person to whom offer is made can accept, no eavesdroppers)
Must be unqualified (mirror-image rule; correspond exactly with offer terms)
May be necessary to follow (clearly) prescribed mode of acceptance
Acceptance must be communicated

Question 20

Acceptance must be communicated

How?

Answer 20

Can be accepted by
* words; or
* conduct (if there’s a unilateral contract)

Question 21

Will the prescribed mode of acceptance always be mandatory? If it is not mandatory, what other form of acceptance will bind offeror?

Answer 21

Only mandatory if particularly clear words
If not mandatory: another mode of acceptance no less advantageous to offeror will bind them

Question 22

Can silence amout to acceptance?

If there is intention to accept but no communication what happens?

Answer 22

Silence CANNOT amoount to accpetance!
Intention but no communication = no contract (i.e. mental assent not acceptance)

Question 23

Can authorised agent inform of acceptance?

Answer 23

Yes, authorised agent can inform of acceptance under authority of offeree

Question 24

How do the rules of revocation change for a unilateral offer?

Re partial performance

Answer 24

Possible to revoke any time prior to completion, but will be under **implied promise **not to revoke if specified act is started within a reasonable time

Partial performance - sufficient to prevent revokation

Errington - father agreed to give house to son and daughter-in-law if they paid off mortgage on house - couple made several payments when dad sought to revoke offer - court held promise could not be revoked after instalments began and continued to be paid

Question 25

How is revocation possible where an offer is made to the whole world?

Answer 25

Almost impossible and only effective if offeror takes reasonable steps to bring revocation to attention of those who saw offer

Question 26

What is the postal rule? | Re acceptance

Answer 26

Acceptance takes effect from moment letter of acceptance is properly posted not when received by offeror Properly posted = letter box, hands of authorised postal operative | Offer accepted when posted ## Footnote Binding contract at the time of posting letter

Question 27

What is the effect on a letter being delayed/lost in the post on the postal rule?

Answer 27

Nothing - rule will still apply | Accepted as soon as **posted**, regardless of whether its read! ## Footnote Postal rule is exception to the principle that acceptance must be communicated to make a binding contract.

Question 28

For poastal rule to apply, following conditions must be met:

Answer 28

1. it was reasonable to use post 2. letter was properly addressed 3. postal rule was not been excluded by offeror ## Footnote (Rule excluded if offer said it requires "notice" in writting to D, acceptance actually had to arrive with D to be effective).

Question 29

When does the postal rule not apply? | 3 situations

Answer 29

* If not contemplated post would be used (e.g. prompt acceptance required) * If incorrectly addressed * If disapplied by offeror (ousts postal rule e.g. requires receipt of acceptance) | Implied condition of prompt acceptance means post would be unreasonable

Question 30

Does the postal rule apply to revocation the same way?

Answer 30

No - revocation of an offer must be received to be effective

Question 31

What are the rules with **instantaneous communication**?

Answer 31

Acceptance takes place where it is **received** by the offeror

Question 32

Where acceptance is communicated by instantaneous means, what happens where the acceptance is not fully communicated due to the fault of the offeror? | E.g. poor mobile reception and do not ask acceptance to be repeated

Answer 32

Offeror may be prevented from saying they did not receive acceptance | Cf not received without fault of offeror = no contract

Question 33

When email is by acceptance and is sent in ordinary office hours on a Friday, but is not seen until Monday, when will it be received (and thus acceptance effective)?

Answer 33

Would have been received on the Friday | Offeree reasonably assumed there was effective communication

Question 34

What about outside of ordinary office hours and emails re acceptance? | I.e. If aen email is sent in the late hours of Friday?

Answer 34

A message sent in late hours of Friday would be received at start of business on Monday | Especially important in international communications

Question 35

How do you communicate acceptance of a unilateral contract?

Answer 35

No need for communication; performance is sufficient!

Question 36

Summary on when: 1. Rejection 2. Revocation 3. Acceptance happens

Answer 36

1. Communicated to offeror 2. Effective upon notice reaching offeror 3. Postal rule = when posted, instantaneous communication = when received by offeror

Question 37

How can an **offer** be **terminated**? | 3 ways

Answer 37

1. Counter offer 2. Lapse of time (passage of time or death) 3. Express rejection 3. Revocation i.e. withdrawal of offer by offeror (**before** acceptance) ## Footnote If oferee paid £1 to keep an option to buy house open for six months, cannot revoke offer.

Question 38

Once an offer has been rejected, can it be accepted?

Answer 38

Not unless offeror makes same offer again

Question 39

When will rejection take effect?

Answer 39

Not until it is actually communicated to the offeror - only then do they know they are free from offer

Question 40

What happens when a counter-offer is accepted? | In terms of the original offer

Answer 40

The original offer is deemed to have been rejected and the counter-offers terms become those of the contract | Last person to assert their own terms and conditions likely to prevail

Question 41

Rules on certainty of agreement? Will the courts not enforce if they doubt certainty?

Answer 41

Only an agreement which is **sufficiently certain** can be enforced by court. | Applies an objective test ## Footnote Not enforcing is a last resort, courts will look to enforce agreement reflecting intentions of the parties.

Question 42

Will an agreement on ‘hire-purchase’ terms (alone) be certain enough to be enforced?

Answer 42

No - so many different hire-purchase agreements that this was too vague to be an enforceable contract

Question 43

Will an agreement to buy ‘X of fair specification’ be certain enough to be enforceable? ## Footnote Hillas - ‘timber of fair specification’

Answer 43

Potentially yes - if **words could be given a reasonable meaning** (esp in light of previous dealings)

Question 44

Whether or not parties reached a complete agreement on materials terms is judged objectively, in context of eg:

Answer 44

* whether parties are in the same trade * trade usage * whether arrangement has been acted on for any length of time; and * whether there is an objective mechanism for resolving any uncertainty, e.g. arbitration clause or a way to calculate e.g. market price at the date of a delivery

Question 45

If there is provisional agreement only, and official one is yet to be drawn?

Answer 45

Irreleavnt that formalised agreement is yet to be drafted, contracts do not have to be in any particular form, parties can be in agreement regardless.

Question 46

Consideration

Answer 46

provide something of value in return

Question 47

What is the basic rule of consideration?

Answer 47

To be able to enforce a promise made to you, you must be able to show you agreed to provide something in return ## Footnote Consideration = some right, interest, profit or benefit accruing to one party or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other

Question 48

Can detriment be good consideration?

Answer 48

## Footnote BUT THIS CONFLICTS SO IDK ABOUT THIS LOL Combe - on divorce husband promised ex wife an allowance of £100 a year but did not make any agreed payments - wife attempted to use PE as a cause of action as she had relied on it = CoA held no consideration given by wife so could not succeed on action

Question 49

What is the difference between executory consideration and executed consideration?

Answer 49

Executory consideration: Parties promise one another to perform something in the future afrter contract formed (e.g. deliver goods to be paid for on delivery) Executed consideration: At time of formation of the contract, consideration already performed (e.g. unilateral contract formed when acceptance occurs) ## Footnote Executory consideration means parties can both agree to provide something, and still fulfil element of consideration for the formation of a contract

Question 50

Consideration need not be adequate

Answer 50

It has to be of some value but does not matter how much/unequal

Question 51

Consideration must be sufficient

Answer 51

Sort of thing the law regards as being appropriate subject matter for a bargain ## Footnote In consideration for 'natural love and affection' / 'stop complaining about being disinherited' = not consdieration.

Question 52

Promise to stop swearing, gambling, drinking, smoking?

Answer 52

US case: people have a right to swear etc, but as a matter of public policy should be discoubraged. Promise to refrain from doing so, held sufficient.

Question 53

Is performing public duty good consideration?

Answer 53

No | But exceeding public duty = good consideration.

Question 54

What are the 4 rules of consideration? | Think: time, move, adequacy and value ## Footnote Subject to exceptions!

Answer 54

**Must not be past** - cannot use act/forbearance which has taken place prior to promise to pay **Must move from promisee** - a party who has not provided consideration may not bring action to enforce contract (consideration cannot come from third party if promisee wants to enforce) **Need not be adequate** - will not interfere with bargain (do not need to be of equal value) **Must be sufficient** - must have some value in the eyes of the law (no matter how small) ## Footnote For sufficiency of consideration - Nestle: chocolate wrappers were good consideration despite being no value to Nestle in exchange for gramophone records and money

Question 55

Past consideration

Answer 55

If A already did/provided smth in the past without being promised anything in return at the time, new promise to pay now once work has been done is **not binding**.

Question 56

What is the exception for **past** consideration? ## Footnote Past consideration example - Eastwood - Eastwood brought up a girl but this was not good consideration for a contract in which he was promised to have his debt paid off in the present as it was in the past

Answer 56

* Where prior act/service was provided by promisee at **promisor’s request ** * and mutual undertanding: it was always **understood that payment would be made for it** | But likely that contract had already formed!

Question 57

What are the 3 requirements for the past consideration exception?

Answer 57

1. Act must have been done at promisor’s request 2. Parties must have understood act was to be rewarded by payment/benefit (expressly or impliedly) 3. Payment/benefits must have been legally enforceable had it been promised in advance ## Footnote E.g. taking a car to the garage, leaving it for repairs, and ultimate price to be decided after completion of repairs

Question 58

What does it mean that consideration must move from the promisee?

Answer 58

A party who has not provided consideration cannot bring action to enforce contract ## Footnote Tweddle - 2 fathers of couple who were about to get married agreed that father of bride paid £200 and father of groom £100 to. bridegroom - groom sought to enforce father-in-law’s promise but held that he could not as no consideration provided (had been provided by fathers)

Question 59

Can an existing contract be good consideration? | Re promise to pay more - good consideration?

Answer 59

Generally, no. But if party **exceeds existing obligations** or **provides a practical benefit** then it can be good consideration | practical benefit = consideration ## Footnote Williams v Roffey - carpenter got into financial difficutly after contracting to build block of flats, needed additional money otherwise could not complete work, meaning the contractors would have been liable for substantial penalties to main contractors - contractors offered additional sum per flat and then did not stick to promise - **avoidance of need to find alternative contractor to do work was held to be a practical benefit, so carpenters had provided good consideration**

Question 60

Performing existing contractual duty

Answer 60

**Not** consideration

Question 61

If promise to pay more was made under duress

Answer 61

It may be set aside

Question 62

Can an existing public duty be good consideration?

Answer 62

Carrying out a public duty imposed by law will not amount to good consideration, but **going beyond it **will ## Footnote England - Police officer providing information to private individual went beyond their public duty of preventing crime

Question 63

Can an existing contract with third party be good consideration? ## Footnote Where A promises to do X for B, then promises to do X for C too

Answer 63

Yes - party here is putting itself at risk of **double liability :o**

Question 64

Promise to accept less

Answer 64

Part payment of the full sum/credit to settle debt is **not binding**. ## Footnote Pinnel - creditor sinly accepting part payment in full and final settlement of the full amount is not binding on creditor. Foakes - she was not given any consideration for her promise to forego interest in debt - not binding.

Question 65

Common law exceptions to rule in Pinnel

Answer 65

Part-payment **in advance of due date** (benefit to creditor) = good consideration

Question 66

In what 2 situations can part-payment of debt be good consideration? ## Footnote Where debtor pays part of debt in return for release from remainder of liability (offering to do something already obliged to do)

Answer 66

Not good consideration even if creditor agrees to release from liability! Unless: * Introducing new element (e.g. providing different thing instead of money, **paying at different time**); or * Payment of a lesser sum by a **third party** (creditor accepts payment by AA of lesser sum; cannot sue debtor for difference) ## Footnote Can also involve practical benefit

Question 67

Must be some benefit/consideration for creditor's promise to accept less to be binding, otherwise...

Answer 67

Otherwise debtor is at risk of creditor changing his mind

Question 68

How to make variation of contract binding?

Answer 68

1. Agreement (offer + acceptance) 2. Intention 3. Consideration

Question 69

What is the doctrine of promissory estoppel?

Answer 69

A **defence** where a party relies on a promise; a promisor cannot go back on a promise where the promisee has relied on it | Can only be used as a defence. ## Footnote Prevents creditor from going back on a promise to accept part payment if it would be unfair to do so. Equitable doctorine. High Trees - tenant could rely on PE to prevent landlord going back on promise to accept reduced rent during war years when flats not fully let. Landord can claim full rent once war time ended + for future, but not during the period of concession (war).

Question 70

Can promissory estoppel be used to start a claim?

Answer 70

NO!!! | Promissory estoppel can only be used as defence.

Question 71

What are the parameters of promissory estoppel: * What does it not act as? * What must the promise be? * What must happen to the position in reliance of promise? * Will deteriment be necessary? | 4 conditions

Answer 71

* Acts as a shield not a sword (does not give right to sue) * Clear and unequivocal promise not to enforce strict legal rights * Someone has relied on that promis, even though they have not provided anything (promisee has made a change in position in reliance); * If he tries to enforce, will be **estopped** = prevented from going back on it if it would be **inequitable** (unfair) (if detrimental = more likely to make it inequitable!) ## Footnote Detriment not required

Question 72

What will not amount to a ‘clear and unequivocal promise’?

Answer 72

A gratuitous privilege given to promisee - promise must be intended to affect legal relations

Question 73

Can promissory estoppel still operate as a defence where the D knowingly underpays and this is accepted? ## Footnote D&C Builders - Ds knew builders under financial difficulty and offered a cheque of £300 in full settlement of £482 debt, which was accepted by the builders, but they later sued for the balance and D sought to rely on promissory estoppel…

Answer 73

No - those who seek equity must do equity

Question 74

How can a promisor resume their legal rights in a case of promissory estoppel? ## Footnote 2 scenarios

Answer 74

1. Giving reasonable notice or 2. Waiting until the period of PE to end (e.g. end of reduced payments for set month) ## Footnote Suspends rights, does not extinguish

Question 75

Will promissory estoppel ever extinguish legal rights? ## Footnote And not just suspend

Answer 75

Yes - past rights e.g. rent for previous quarters in High Trees

Question 76

Limitations of promissory estoppel

Answer 76

* it can only be used as a ***defence*** * there must have been a ***promise to waive strict legal rights*** * ***Promisee*** (debtor) *must have acted on the promise* *but not necessarily to their detriment. *(E.g. in High Trees - debtor simply paid half rent). * With ongoing payments, doctorine operates to suspend strict legal right (i.e. creditor can **resume** full payment with*** reasonable notice***). But creditor cannot claim back any payments for concessionary period. * To use equitable promissory estoppel, party must have **clean hands**. (Eg if debtor just wants to take avdantage of creditor's difficulties = cannot use promissory estoppel as a defence).

Question 77

What is the test for an intention to create legal relations?

Answer 77

**Objective**; determined by what actions of parties in circumstances suggest

Question 78

How do commercial and social/domestic agreements differ re intention to create?

Answer 78

Commercial = presumption that parties (B2B/B2C) intend to be bound (rebutted through clear words) Social/domestic = presumption there was no intention (rebutted through circumstances e.g. separation)

Question 79

What is the presumption on intention where an agreement is made by family members living in amity? ## Footnote Amity = a good relationship

Answer 79

Presumption against intention

Question 80

Will ambiguous wording rebut the presumption that commercial parties intended agreements to be binding?

Answer 80

No - clear words must be used

Question 81

Husband and wife. Solicitors are settling financial terms of their advice.

Answer 81

Yes, intention to be bound as parties dealing at arm's length. Solicitor's involved.

Question 82

Two Friends. Reach an agreement on how they will contribute to a joint venture.

Answer 82

Yes,intentoin to be bound because lots of money at stake.

Question 83

Brother and sister. Expressly agree that their agreement will be legally binding.

Answer 83

Yes, presumption would be rebutted, there is intention to be bound.

Question 84

Two counsins. One sells house to the other.

Answer 84

Yes, relationship not particularly close but agr is about asset of considerable worth and will have been formalised.

Question 85

Parent and child. Agree that child must wash dishes to get their weekly financial allowance of £10.

Answer 85

No, very close relationship (parent/child) and sum involved is nominal.

Question 86

Do advertisements present an intention to be bound?

Answer 86

Carbolic - assurance of deposit money was demonstration of intention Esso Petroleum - business context, commercial advantage, trivial value, and likelihood of legal remedies were all considered as factors

Question 87

What inference does the expression ‘subject to contract’ create?

Answer 87

An inference that parties do not intend to be bound until formal execution of contract - so an agreement ‘subject to contract’ is not binding ## Footnote In a sale of land, it is usual to express tentative preliminary agreement to be ‘subject to contract’, so as to give the parties an opportunity to reflect/seek legal or other advice before entering a binding contra

Question 88

Who has **capacity** to enter into a contract?

Answer 88

Those over 18 with sound mind and not suffering from a factor ruling out capacity | Minors generally not bound, but see exeptions (e.g. necessaries)

Question 89

If someone contracted with a minor, and was not aware that the minor has lied about their age, will they generally be bound by a contract they enter with them?

Answer 89

No

Question 90

What are the exceptions for minors re capacity? | I.e. when both parties bound by contract

Answer 90

1. Bound by contract to supply **necessaries** to them if contract is for minor’s benefit 2. Contracts of **employment, apprenticeships or education** if it is for benefit of minor

Question 91

What is a ‘necessary’?

Answer 91

A good suitable to the condition in life of the minor or other person concerned and to their actual requirements at time of sale and delivery ## Footnote Nash - wasitcoats supplied to minor undergrad at Cambridge were suitable but not necessary as he already had sufficient clothing = contract not enforceable

Question 92

Must a minor pay the actual cost of the ‘necessaries’ supplied?

Answer 92

No - need to pay a reasonable price

Question 93

Will a young footballer’s contract with a club be beneficial and thus enforceable? ## Footnote Aylesbury Football Club

Answer 93

Not if they do not receive extra training/experience, terms are onerous, wages depended on will of employer, and/or freedom is restricted to pursue football career | Not a contract for neccessaries. ## Footnote Minor entitled to terminate his contract with football agent - not bound.

Question 94

Can someone party to a contract with a minor enforce it? Vice versa?

Answer 94

Unless one of the exceptions applies… * Cannot enforce contract against minor * Minor can enforce contract against other party ## Footnote Once minor reaches 18, contract binding on them

Question 95

When does someone lack capacity under MCA?

Answer 95

If they are unable to make a decision for themselves in relation to matter at time contract made (whether impairment is permanent or temporary) ## Footnote NB capacity not something someone has for all purposes e.g. someone with brain injury might have capacity to decide where to live but not to invest a large sum of money

Question 96

What is the effect of entering into a contract with a person lacking capacity? Binding or voidable?

Answer 96

Contract is **binding** unless person claiming incapacity can establish they did **not understand what they were doing** and **other party knew this** (contract **voidable** if so)

Question 97

If person is incapable of undetanding nature of transaction *AND* other party knew that this was the case

Answer 97

Contract is **voidable** = person with mental incapacity can choose to terminate.

Question 98

If the other party is **UNAWARE** of A's mental incapacity

Answer 98

Contract is **valid**, even if A has dementia/mental incapacity/cannot undertand the deal.

Question 99

What is the exception for persons without capacity? What will they remain liable for?

Answer 99

To pay a reasonable price for ‘necessaries’; goods or services suitable to a person’s condition of life and to his actual requirements at time goods/services supplied

Question 100

Registered companies

Answer 100

Contratc between registered comp *AND* outsider = **binding** ## Footnote Registered comp can never act ultra vires with outsiders + powers of Ds to bind comp free of any limitation.

Question 101

Statutory corporations | Local authorities

Answer 101

Look at statute that created to know for what **purposes** statutory corp. can enter contracts (contracts about that binding), **otherwise void**.

Question 102

Limited Liability Partnerships (LLPs)

Answer 102

Have unilimited capacity. LLPs are **always bound**.